Resolution No. 03/2018/NQ-HDTP dated May 15, 2018 of the Council of Judges of the Supreme People’s Court guiding the implementation of certain regulations in settlement of dispute over settlement of non-performing loans, collateral associated with non-performing loans at people’s court

THE COUNCIL OF JUDGES
THE SUPREME PEOPLE’S COURT 

Resolution No. 03/2018/NQ-HDTP dated May 15, 2018 of the Council of Judges of the Supreme People’s Court guiding the implementation of certain regulations in settlement of dispute over settlement of non-performing loans, collateral associated with non-performing loans at people’s court

Pursuant to Law on Organization of People’s Court dated November 24, 2014;

Pursuant to Resolution No. 42/2017/QH14 on pilot settlement of bad debts of credit institutions;

With a view to consistently implement certain regulations on settlement of dispute over settlement of non-performing loans (NPL), collateral of NPL at People’s Courts;

With the mutual consent of Chief Procurator of the Supreme People’s Procuracy and the Minister of Justice,

RESOLVES:

Article 1. Scopeof adjustment

This Resolution provides guidelines for reduced procedures for settlement of dispute over obligation to transfer collateral, dispute over right to sell collateral associated with NPL of credit institutions or branches of foreign banks, bad debt purchasers/managers; certain regulations of law on the resolution of disputes over settlement of NPL, collateral associated with NPL as prescribed in Resolution No. 42/2017/QH14 on pilot settlement of bad debts of credit institutions (hereinafter referred to as Resolution No. 42/2017/QH14).

Article 2. Dispute over obligation to transfer collateral, dispute over right to sell collateral associated with NPL prescribed in Clause 1 Article 8 of Resolution No. 42/2017/QH14

1. Dispute over obligation to transfer collateral associated with NPL means a dispute over the case that the debtor or collateral holder fails to transfer the collateral to the secured party or the holder of right to sell the collateral; or transfer the collateral to them unsatisfactorily with their request.

For example: Joint-stock commercial bank A gives limited liability company B a loan of VND 5 billion. In order to secure the loan under a loan agreement, company B (debtor) takes out a mortgage from bank A (secured party) on house X under company B’s ownership. The loan is determined as NPL, bank A requests company B to transfer the house X (collateral) for further settlement, but company B refuses to transfer it. Such dispute is considered as  "a dispute over obligation to transfer collateral associated with NPL".

2. Dispute over right to sell collateral associated with NPL means a dispute over determining holder of right to sell collateral associated with NPL.

For example: Joint-stock commercial bank A gives limited liability company B a loan of VND 5 billion. In order to secure a loan under a loan agreement, company B (debtor) takes out a mortgage from bank A (secured party) on the house X under company B’s ownership. The loan is determined as NPL, bank A requests company B to transfer the house X (collateral) for further settlement, but company B refuses to transfer it with the reason that it has a right to transfer the house X to another party for settlement of NPL. Such dispute is considered as  “a dispute over right to sell collateral associated with NPL".

Article 3. Dispute over settlement of NPL, collateral associated with NPL being settled under reduced procedures

1. A court shall apply reduced procedures to a dispute over obligation to transfer collateral or dispute over right to sell collateral associated with NPL if it meets conditions as prescribed in Clause 1 Article 8 of Resolution No. 42/2017/QH14 and guidelines hereof.

2. During settling a marriage and family case, before the court considers whether to bring it to first-instance trial, if an involved party requests the court to settle the dispute over obligation to transfer collateral or the dispute over right to sell collateral associated with NPL prescribed in Clause 1 Article 8 of Resolution No. 42/2017/QH14 in which the collateral is the marital property (jointly owned by husband and wife), the court may separate such a request to be heard in another case under reduced procedures.

For example: People’s Court of HP city accepts to consider a divorce case between Mr. A and Mrs. B. The joint-stock commercial bank X is considered as person with relevant interests and obligations. During preparation for trial, bank X requests the court in writing to settle the dispute over obligation to transfer collateral being land use right and right to ownership of the house on land, which is considered as their marital property. Furthermore, bank X requests the court to separate such a request to be heard in another case under reduced procedures. In this circumstance, if documentation and evidence justifying the dispute over obligation to transfer collateral between bank X and Mr. A and Mrs. provided by bank X meet conditions prescribed in Clause 1 Article 8 of Resolution No. 42/2017/QH14 and guidelines in this Resolution, the court shall separate the bank X request to another case under reduced procedures.

3. The court shall then apply regulations of the Civil Procedure Code in terms of civil lawsuit settlement under reduced procedures, its guiding documents and guidelines in this Resolution to settle dispute prescribed in Clause 1, Clause 2 hereof.

Article 4. Lawsuit petition, submission and acceptance of lawsuit petition in terms of settlement of NPL, collateral of NPL under reduced procedures

1. Form and content of a lawsuit petition are regulated in Clauses 1, 2, 3 and 4 Article 189 of the Civil Procedure Code, Form No. 23-DS issued together with Resolution No. 01/2017/NQ-HDTP dated January 13, 2017 of the Judges Council of the Supreme People’s Court promulgating certain forms in civil procedures and guidelines in Article 6 hereof.

2. Documents enclosed with a lawsuit petition:

a) Credit contract;

b) Documentation and evidence justifying that the loan under dispute is determined as a NPL as prescribed in Article 4 of Resolution No. 42/2017/QH14;

c) Security agreement or document and evidence justifying the registration of secured transaction or security interest;

d) Items of evidence for place of residence and place of work of defendant, person with relevant interests and obligations being individuals, or head office of defendant, person with relevant interests and obligations being organizations;

dd) If an involved party resides in a foreign country, one of the following items of evidence is also required:

dd1) A notarized or authenticated written agreement between the overseas involved party and the involved party in Vietnam that requests the court to settle the dispute under reduced procedures. If the aforesaid agreement is made in the foreign country, it must be consular legalized, other than cases of exemption for consular legalization as prescribed in Clauses 1 and 2 Article 9 of Government’s Decree No. 111/2011/ND-CP dated December 1, 2011 in terms of consular certification, consular legalization;

dd2) Items of evidence justifying legal ownership of property and mutual consent as to actions against the property between involved parties which are duly notarized and authenticated. If the aforesaid document is made in the foreign country, it must be consular legalized, other than cases of exemption for consular legalization as prescribed in Clauses 1 and 2 Article 9 of Government’s Decree No. 111/2011/ND-CP dated December 1, 2011 in terms of consular certification, consular legalization.

3. The submission and acceptance of lawsuit petition against dispute over settlement of NPL, collateral associated with NPL shall be done in accordance with the Civil Procedure Code and its guiding documents.

4. The court shall state a brief of dispute as prescribed in Section 1 Chapter III of the Civil Procedure Code and guidelines in Article 3 hereof.

For example: “Re: dispute over obligation to sell collateral associated with NPL”, "Re: dispute over determining holder of right to sell collateral associated with NPL”.

Article 5. Arrangement over obligation to transfer collateral associated with NPL, dispute “without involved party residing in a foreign country and property under dispute in foreign country” prescribed in Clause 1 Article 8 of Resolution No. 42/2017/QH14

1. Arrangement over obligation to transfer collateral associated with NPL prescribed in Point a Clause 1 Article 8 of Resolution No. 42/2017/QH14 may be stated in a security agreement, addendum of security agreement or another contract-equivalent document.

2. Dispute “without involved party residing in a foreign country” prescribed in Point c Clause 1 Article 8 of Resolution No. 42/2017/QH14 means a dispute, which is not fallen in the following cases:

a) A Vietnamese involved party who has not resided in Vietnam at the time when the court accepts the lawsuit petition. The court shall determine his/her place of residence as prescribed in Law on Residence;

b) A foreign involved party who has not resided, either permanently or temporarily, in Vietnam at the time when the court accepts the lawsuit petition. The court shall determine the place of permanent or temporary residence of the foreigner as prescribed in Law on Entry, Exit, Transit, Residence of Foreigner in Vietnam;

c) A foreign organization involved party prescribed in Clause 26 Article 4 of the Law on Enterprise which has not authorize a natural or juridical person in Vietnam to file a lawsuit or participate in legal proceedings.

3. The dispute “without property under dispute in foreign country” prescribed in Point c Clause 1 Article 8 of Resolution No. 42/2017/QH14 means a dispute in which there is not property being determined as prescribed in the Civil Code beyond the territory of the Socialist Republic of Vietnam at the time when the court accepts the lawsuit petition.

Article 6. Authorization of filing a lawsuit or participating in legal proceedings

1. Entitlement to authorize

a) A natural person is entitled to authorize another juridical person or natural person to participate in legal proceedings at the competent court to settle a dispute over settlement of NPL or collateral associated with NPL.

The lawsuit petition of a natural person shall be made in accordance with Clause 2 Article 189 of the Civil Procedure Code.

b) A juridical person is entitled to authorize another juridical person or natural person to file a lawsuit at the competent court to settle a dispute over settlement of NPL or collateral associated with NPL.

c) The authorized natural person or juridical person may re-authorize to another natural or juridical person to participate in the legal proceedings if the authorizer gives a consent in writing.

2. The authorization prescribed in Clause 1 hereof shall be made in writing and the scope and content of authorization shall be clarified.

3. A lawsuit petition of juridical person shall be written and signed as follows:

a) If the authorized representative of plaintiff is a natural person, the plaintiff section shall contain name and address or juridical person plaintiff, and full name and address of the authorized representative of plaintiff; the bottom of lawsuit petition shall contain the phrase “representative of plaintiff” and full name and signature of the authorized person. The legal representative of the juridical person plaintiff is not obliged to bear his/her name and signature at the bottom of the lawsuit petition;

b) If the authorized representative of plaintiff is a juridical person, name and address or juridical person plaintiff and name and address of juridical person authorized representative, full name and position of legal representative of juridical person authorized representative shall be written in the plaintiff section; the bottom of the lawsuit petition shall contain the phrase “representative of plaintiff, authorized juridical person, legal representative" and legal representative’s signature, full name and authorized juridical person s seal. The legal representative of the juridical person plaintiff is not obliged to bear his/her name and signature at the end of the lawsuit petition.

4. During settlement of dispute over settlement of NPL or collateral associated with NPL, if an authorization contract which is established before January 1, 2017 has not been performed or has been performed but its content or form is not compliant with the Civil Code 2015 and no dispute over such an authorization contract arises while the court is considering the case, the court shall recognize the validity of such authorization contract without requiring the involved parties to re-establish it.

Article 7. Assumption of litigation rights and obligations

1. The purchaser of a NPL or a debt incurred from a NPL of a credit institution, branch of foreign bank, or bad debt purchaser/manager shall assume litigation rights and obligations from the seller as prescribed in Clause 4 Article 74 of the Civil Procedure Code.

2. If an involved party sells/purchases a NPL or a debt incurred from a NPL while the civil case is considered by the court under first-instance trial, appellate trial or under cassation procedure or reopening procedure, the court shall keep settling the lawsuit under general procedures. The court shall further identify the status of involved parties and entities assuming their litigation rights and obligations according to the debt purchase contract as follows:

a) An entity who purchases a part of NPL or a debt incurred from NPL shall assume the seller’s litigation rights and obligations and be considered as seller towards to purchased part of debt. The court shall indicate the purchaser as "entity assuming a part of litigation rights and obligations” from the seller (stating debt seller’s name) in litigation-related documentation;

b) An entity who purchases the whole of NPL or a debt incurred from NPL shall assume the whole seller’s litigation rights and obligations and be considered as a substitute for the seller. The court shall indicate the purchaser as "entity assuming litigation rights and obligations” from the seller (stating debt seller’s name) in litigation documentation;

c) From the date on which the court receives evidence proving that the debt purchase contract comes into force, which means that the purchaser starts establishing its ownership to the purchased property as per the law, the litigation documentation shall state the purchaser as the entity assuming rights and obligations from the seller.

For example: Joint-stock commercial bank A is a plaintiff in a case “dispute over obligation to transfer collateral”. While the court is settling the case, bank A sells the whole of NPL and right to request to transfer collateral to the limited liability company B. From the date on which evidence proving that purchaser starts establishing its ownership is received, the court shall consider company B as an entity assuming litigation rights and obligations from the plaintiff and litigation documentation shall be written as follows: “Plaintiff: Joint-stock commercial bank A, headquartered at …; limited liability company B, headquartered at …, which assumes litigation rights and obligations from bank A; legal representative of plaintiff is Mr. Nguyen Van C – Director of company B”.

Article 8. Collateral as prescribed Point d Clause 2 Article 7 of Resolution No. 42/2017/QH14

1. In the event that a collateral associated with NPL is an asset of enterprise/cooperatives against which a request for initiation of its bankruptcy process is accepted by a court and during such a process, the credit institution, branch of foreign bank or bad debt purchaser/manager is not entitled to seize the collateral. The seizure of collateral in such circumstance shall be done in accordance with the Law on Bankruptcy.

2. In the event that a collateral associated with NPL is an asset of a third party but the secured party is an enterprise/cooperatives against which a request for initiation of its bankruptcy process is accepted by a court and during such a process, the credit institution, branch of foreign bank or bad debt purchaser/manager is entitled to seize the collateral and take actions as per the law or requests the competent court to settle it during the bankruptcy process as per the law.

Article 9. Transitionalprovisions

1. In case of a case of dispute over settlement of NPL, collateral associated with NPL that the court accepted before effective date of Resolution but it has not been brought to first-instance trial, appellate trial or trial under cassation procedure or reopening procedure, guidelines in this Resolution shall apply. Procedural activities conducted before effective date of this Resolution in accordance with the Civil Procedure Code are not required to be re-conducted.

2. With respect to a case of dispute over settlement of NPL, collateral associated with NPL that the court accepts within effective period of this Resolution but will still be considering when this Resolution ceases to be effective, the court shall keep applying regulations in this Resolution for settlement of the case.

3. If a judgment/decision of court becomes legally effective before effective date of this Resolution without applying regulations herein for appeal under cassation procedure or reopening procedure, except for appeal for other causes.

Article 10.Effect

1. This Resolution is ratified by the Council of Judges of the Supreme People’s Court on May 15, 2016 and comes into force as of July 1, 2018 to expiry date of Resolution No. 42/2017/QH14.

2. If there is any conflict between this Resolution and other Resolutions on guidelines for the Civil Procedure Code over the same matter, this Resolution shall prevail.

3. On an annual basis or upon request of the Supreme People’s Court, People’s Courts shall release statistics of cases of dispute over settlement of NPL, collateral associated with NPL regarding every category of dispute prescribed in Article 3 hereof. The statistic period is expressed within a working year, from December 1 of the previous year to November 30 of the reporting year.

4. Any difficulties arising in the course of implementation of this Circular should be reported to the Department of Legal and Science affiliated to the Supreme People’s Court for consideration.

For the People’s Council

The Judge

Nguyen Hoa Binh